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Improving Incentive Programs to Increase Channel Revenue: 3 Essential Steps

For companies that rely on channel sales for a significant portion of revenue, there’s been a noticeable shift in channel operations over the past couple of years. Evolving technologies, buyer behaviors, and environmental factors have all had some effect on how companies at various points of the channel conduct and experience business.

For many, changes in the landscape have creeped up on them. The result? A tight, competitive market for top-performing, loyal channel partners. More than ever, companies are sharing the same partners. Thus, the need to stand out among channel partners is imperative. Manufacturers are tossing out their old, “vanilla” strategies in favor of developing more strategic, better-targeted, and high-impact incentive programs to stand out amongst competitors and appeal to partners.

Of course, the more strategic and complex the incentive program, the more difficult they can be to manage. They will include more precise eligibility requirements, such as complex combinations of products, purchase models, customer types, markets, market share, and geographies. The complexities are further amplified when you are offering complex products through multi-level complex channels!

The right incentive program will bring in the right partners. For most channel teams, going back to the older, simpler – albeit, easier to manage – incentive programs of the past is not an option if they want to be successful today. So, what do channel teams need in order to launch and manage more strategic – yet more complex – incentive programs effectively?

Purpose-built systems to define, operationalize, and assess their incentives.

     1.  Defining the Incentive

Defining, reviewing, approving, and funding channel incentives is cumbersome, and can ultimately undermine the efficiency of the channel team. Channel teams end up wasting time chasing down reviews and signatures or end up getting pulled in so many different directions, they are creating and amending incentive agreements on the fly. The result is confusion in the channel – partners become overwhelmed by the complexity and aren’t even sure of their eligibility for various incentives.

To improve the partner experience and program outcomes, manufacturers must pay close attention to streamlining these processes more carefully from the beginning to ensure terms and conditions are fully

     2.  Operationalizing the Incentive

Processing high-volumes of incentive claims and payments may be the most challenging part of operating incentive programs in a multi-level channel system – especially as these programs grow more and more complex.

First, claims must be validated to confirm that the partner making the claim is eligible to receive payment on the incentive – ensuring that the information in the claim is accurate and verifying the claim against the terms and conditions of the original agreement. Next, validated claims must be calculated accurately for payment. Accurate calculation depends on having an accurate record of the incentive opportunities defined along with the partner agreements.

Once validated and calculated, payment amounts must then be communicated to the ERP system to enable the financial team to make payments with confidence. This must also be tracked with full auditability, for both reporting purposes and as backup should a partner have a dispute.

Any misstep in processing claims can lead to erroneous payments, and that can be costly. What may not seem like much per incentive can quickly snowball and end up costing the manufacturer big on the bottom line.

A reliable, automated system will not only simplify and speed these processes, but will ensure accuracy on the back end. Key functionality to look for: a system that integrates with your contract lifecycle management (CLM) and ERP systems to ensure accuracy of information from start to finish.

     3.  Assessing Incentive Impacts

Understanding past incentive performance through advanced analytics helps channel teams to improve their decision-making on future incentive programs. Channel teams will need visibility to a more precise level of detail, including: 

  • Partner performance
  • Product sales performance
  • Sales by eligible partners vs. ineligible partners
  • Sales of products covered by the incentive compared to products not included
  • Geographies, partner categories, and product categories of incentivized versus non-incentivized sales
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